The following is a Bakersfield Californian Editorial opinion forwarded to me by a commercial real estate advisor Kayole Bradford.
The young real estate tycoon had impressed everyone with his flair, his extravagance and his generosity. He drove an exotic Italian sports car, wore Rolex watches, pledged $1 million to the Cal State athletic department and boasted of billion-dollar sales years to come.
When it all came crashing down, prosecutors from the District Attorney's office publicly wished they'd had better resources in place to track cases of alleged real estate fraud. Only then, taking advantage of a 10-year-old state law that allows counties to fund real estate fraud enforcement units with a small fee associated with certain property-transfer filings, did they go out and get themselves those resources.
The flashy real estate entrepreneur in question was Tony Daniloo, chief financial officer of Turlock-based DreamLife Financial. The District Attorney's office in question was in Stanislaus County, which added the new fraud-fighting fee in July 2005.
Daniloo, who was arrested in December 2004, pleaded guilty in December 2006 to 122 felony counts related to various shady real estate dealings and was eventually sentenced to seven years in federal prison. The Modesto Bee first alerted law enforcement to the shenanigans of the one-time Cal State Stanislaus athletic department booster.
"Perhaps if we had a real estate fraud unit up and running, maybe we would have seen it first," Stanislaus Assistant District Attorney Carol Shipley told The Bee at the time.
If the Daniloo story sounds at least a little bit familiar, that's because it is. You've read about allegations of dubious transactions in the Bakersfield market, too.
The two stories have their differences, though. One is that no Bakersfield Realtor has been charged with real estate fraud on a scale approaching Daniloo's. Another is that the Kern District Attorney has not shown much interest in funding a real estate fraud prosecution unit in this way, despite allegations deserving of the department's concern.
A $2 fee -- tacked on to every deed of trust, mortgage agreement or notice of default -- would generate $150,000 to $175,000 annually for the DA's office and other law enforcement agencies. Two bucks seems like cheap insurance against fraudulent brokers, agents, appraisers and loan officers.
Kern County Assessor-Recorder Jim Fitch, whose office would administer the fund, says it's been informally discussed, but the District Attorney has shown no interest. Prosecutors say it would be more trouble than it's worth.
The fee wouldn't generate enough money to hire the right people, prosecutors are going after real estate fraud just fine already, and they haven't seen all that much additional need, anyway.
But Stanislaus County Deputy District Attorney Marlisa Ferreira says the program -- which has no local-match funding requirements -- has been an invaluable resource.
"It hasn't been so much a benefit to our office as it's been a benefit to our community," she said. "It's had a huge impact. People are out there committing fraud, and there's nothing worse than losing your house. I can't believe you don't have this (program) in a county the size of Kern."
Larry Roberts, lead deputy district attorney in San Bernardino County's real estate fraud division, believes the extra funding program -- implemented in his county in 1996 -- has led to convictions that wouldn't have been achieved otherwise.
"If you want to commit crime and you don't want to get caught, white-collar crime, such as real estate fraud, is a good one to try because there aren't enough judges, prosecutors or courtrooms to handle it," Roberts said. "But for that (extra) funding, a lot of bad guys would get away. Most of them would, in fact."
At least 14 California counties, including Los Angeles and Fresno, have created or beefed up their real estate fraud units using the $2 transaction fee, which must be authorized by their respective county boards of supervisors.
County Counsel Bernie Barmann, the man Kern County supervisors would likely consult, said he was not familiar with the provision of state law that provides for the real estate fee.
Vulnerability to real estate fraud -- especially foreclosure fraud -- is high these days, given the spike in foreclosure filings. Kern County is fourth in the state in that category, behind only San Joaquin, Riverside and Sacramento counties -- all of which have enacted the $2 fraud-investigation fee.
It's time to beef up enforcement of real estate fraud in Kern County. Start by adopting the 10-year-old state-authorized fee designed to help fund it.
Monday, August 20, 2007
Tuesday, August 14, 2007
1 out of every 47
That's right, Bakersfield made another top ten list. We are eighth among the nation's 100 biggest cities for foreclosure activity during the first 6 months of the year according to an article featured today on the Californians website. It goes on to say that 1 out of every 47 households has had a foreclosure filing. Hey we are better off than Stockton where it is 1 out of 27.
That is definitely not good news but I don't think it is as bad as everyone has expected or as bad as what many have predicted. Heck if you took out the hundreds of homes and affected homes that one self proclaimed "Real Estate Mogul" personally screwed up we might not have even made the top 50! I heard the other day from an owner of a mortgage company that we would be looking at a 50% foreclosure rate. REALLY??? Because if that happens we might as well shut down Bakersfield and try again down the road.
I think the important thing to keep in mind here is that the old saying of "everyone has an opinion and they all stink" holds pretty true. No one knows exactly how things are going to play out but it does not look like the doom and gloom scenario's are all that likely. I will do a little research on this but I think there have been times in recent history that the foreclosure % was even higher than it is now. Please let me know if anyone has any details on this.
That is definitely not good news but I don't think it is as bad as everyone has expected or as bad as what many have predicted. Heck if you took out the hundreds of homes and affected homes that one self proclaimed "Real Estate Mogul" personally screwed up we might not have even made the top 50! I heard the other day from an owner of a mortgage company that we would be looking at a 50% foreclosure rate. REALLY??? Because if that happens we might as well shut down Bakersfield and try again down the road.
I think the important thing to keep in mind here is that the old saying of "everyone has an opinion and they all stink" holds pretty true. No one knows exactly how things are going to play out but it does not look like the doom and gloom scenario's are all that likely. I will do a little research on this but I think there have been times in recent history that the foreclosure % was even higher than it is now. Please let me know if anyone has any details on this.
Thursday, August 9, 2007
West Nile, Realtors, & Deadbeats
The Bakersfield Californian had an article on Tuesday's front page about pools in vacant homes being a concern for mosquito breeding grounds. Gov. Schwarzenegger mentioned working with the real estate community to help ensure these vacant homes do not become cause of West Nile virus outbreaks due to standing water. Kern County currently has 38 of the 64 cases of West Nile in the state of California and so this is a cause of concern in the local real estate community. Basically if Realtors see any issues at a vacant home they can call vector control and they will send someone out to treat the standing water and the issue is done. There is no charge, they do not need any permission from anyone to go, they just need to know where the problem is. It sounds very easy right? No problem? If as a Realtor you see standing water anywhere, just make a phone call?
You would think this would be a done issue and would not even be worthy of any more discussion- until the Californian decides to call the Bakersfield Association of Realtors for a comment. That's where the best and the brightest start making comments that affect the public opinion of all local Realtors.
Ray Karpe the association president took the stance of -WELL, THIS COULD LEAD TO A POTENTIAL LAWSUIT and -WELL, IS IT REALLY OUR JOB TO DO THIS and -WELL, THE ASSOCIATION CANT MAKE ANYONE DO ANYTHING.
I can definitely live with these half hearted responses that really don't say anything at all even though I think he would have been better off with a "no comment". The real problem is when they get Real Estate broker Darrell Sparks on the line and one of his printed comments is "IF YOU'RE UPSET WITH SOMEBODY, MAYBE YOU SHOULD BE UPSET WITH THE DEADBEAT WHO DIDN'T MAKE THEIR PAYMENTS" referring to people who have been through a foreclosure and now are out of their home. So according to Darrell people who have lost their homes are "DEADBEATS". I think that may be a little extreme.
So now thanks to the association of Realtors and Darrell Sparks we have taken a very minor issue where we could have said "Yeah sure, no problem, we're here to help" and turned it into a large front page article making us all look like we are insensitive and afraid to commit to help with anything.
Thanks guys, I appreciate you stepping up and speaking out for our behalf again and leaving such a good impression with our community.
You would think this would be a done issue and would not even be worthy of any more discussion- until the Californian decides to call the Bakersfield Association of Realtors for a comment. That's where the best and the brightest start making comments that affect the public opinion of all local Realtors.
Ray Karpe the association president took the stance of -WELL, THIS COULD LEAD TO A POTENTIAL LAWSUIT and -WELL, IS IT REALLY OUR JOB TO DO THIS and -WELL, THE ASSOCIATION CANT MAKE ANYONE DO ANYTHING.
I can definitely live with these half hearted responses that really don't say anything at all even though I think he would have been better off with a "no comment". The real problem is when they get Real Estate broker Darrell Sparks on the line and one of his printed comments is "IF YOU'RE UPSET WITH SOMEBODY, MAYBE YOU SHOULD BE UPSET WITH THE DEADBEAT WHO DIDN'T MAKE THEIR PAYMENTS" referring to people who have been through a foreclosure and now are out of their home. So according to Darrell people who have lost their homes are "DEADBEATS". I think that may be a little extreme.
So now thanks to the association of Realtors and Darrell Sparks we have taken a very minor issue where we could have said "Yeah sure, no problem, we're here to help" and turned it into a large front page article making us all look like we are insensitive and afraid to commit to help with anything.
Thanks guys, I appreciate you stepping up and speaking out for our behalf again and leaving such a good impression with our community.
Monday, August 6, 2007
Another Lender files Chapter 11
NEW YORK (Reuters) - American Home Mortgage Investment Corp. filed for Chapter 11 bankruptcy protection after rising customer defaults and unfriendly credit markets brought the once-thriving lender to its knees.
One of the largest independent U.S. home loan providers, American Home on Monday filed for protection from creditors in U.S. Bankruptcy Court in Delaware. American Home becomes the second-largest U.S. residential lender to go under this year, after New Century Financial Corp. .
In a court filing, Chief Executive and founder Michael Strauss said the market for mortgages and loan-backed securities had become "disrupted to the point of dysfunction." The filing came after around-the-clock talks last week with at least four potential buyers fell through, he added.
"If you don't have cash, you're out," said David Olson, president of Wholesale Access, a Columbia, Maryland, research firm that tracks the mortgage industry. "The market is pretty chaotic. Everybody is waiting for mortgages to reprice and for the market to restabilize."
American Home did not return calls seeking comment.
American Home last year grew to become the 10th-largest U.S. retail mortgage lender by originating $59 billion in loans. It sold loans through 2,450 loan officers, as well as buying loans through brokers across the United States.
American Home specialized in Alt-A mortgages, alternatives for borrowers considered low-risk but who can't satisfy all conditions for "prime" mortgages. American Home had $20.6 billion in assets and $19.3 billion in debt on March 31.
The court filing followed its decision Friday to shut down its lending business and slash thousands of jobs as American Home's banks put the squeeze on its credit lines. American Home said it has more than 100,000 creditors.
GETTING WORSE
The bankruptcy filing showed that problems in the mortgage business have spread from the riskiest, "subprime" borrowers to people who fall just short of qualifying for prime loans.
WL Ross & Co., a firm run by distressed-asset specialist Wilbur Ross, will provide up to $50 million in debtor-in-possession financing to sustain American Home. Ross expects problems in U.S. mortgages will worsen.
"It's our initial foray into subprime," Ross said in an interview. "We've been looking at subprime for quite a while and this is the first affirmative commitment we've made."
Separately on Monday, troubled mortgage company NovaStar Financial Inc. said it suspended issuing commitments for new loans from wholesale channels until Tuesday.
According to court papers. Melville, New York-based American Home wants to sell its loan portfolio and loan-servicing business through an auction. Bids are due August 29, and an auction may take place on September 5.
Still, American Home said many creditors may not be paid in full, and common shareholders will likely receive nothing for their shares. American Home shares will likely be delisted from the New York Stock Exchange.
American Home hired turnaround specialist Stephen Cooper, of Kroll Zolfo Cooper, as chief restructuring officer to lead it through bankruptcy. Cooper performed a similar role for energy trader Enron Corp. in the second-largest U.S. bankruptcy case ever.
SUDDEN REVERSAL
American Home filed for bankruptcy protection after disruption in mortgage and housing markets fueled a cash crunch.
Lower bids from banks that buy mortgages and loan-backed securities forced American Home to write down the value of its assets, prompting banks that provided its credit lines to demand more cash collateral, the company said in court filings.
The company "experienced this sudden reversal of its fortunes due to the unanticipated and rather sudden deterioration in the secondary and national real estate markets," said Strauss, who founded American Home in 1988.
More than a half dozen mortgage lenders have declared bankruptcy in the past year, with most catering to subprime borrowers. Dozens more lenders have exited the business by shutting down or selling off troubled units.
American Home in late June cut its dividend and warned of rising losses from bad loans. By July 27, it revealed it was suffering a credit crunch and postponed paying a dividend.
By the end of July, it was unable to meet margin calls and lenders threatened to sell assets.
The company shuttered most operations on Friday, laying off about 6,500 workers. It now has about 1,000 employees, and said more jobs will be cut as its operations are wound down.
(Additional reporting by Tim McLaughlin and Jonathan Stempel)
Copyright 2007 Reuters
One of the largest independent U.S. home loan providers, American Home on Monday filed for protection from creditors in U.S. Bankruptcy Court in Delaware. American Home becomes the second-largest U.S. residential lender to go under this year, after New Century Financial Corp. .
In a court filing, Chief Executive and founder Michael Strauss said the market for mortgages and loan-backed securities had become "disrupted to the point of dysfunction." The filing came after around-the-clock talks last week with at least four potential buyers fell through, he added.
"If you don't have cash, you're out," said David Olson, president of Wholesale Access, a Columbia, Maryland, research firm that tracks the mortgage industry. "The market is pretty chaotic. Everybody is waiting for mortgages to reprice and for the market to restabilize."
American Home did not return calls seeking comment.
American Home last year grew to become the 10th-largest U.S. retail mortgage lender by originating $59 billion in loans. It sold loans through 2,450 loan officers, as well as buying loans through brokers across the United States.
American Home specialized in Alt-A mortgages, alternatives for borrowers considered low-risk but who can't satisfy all conditions for "prime" mortgages. American Home had $20.6 billion in assets and $19.3 billion in debt on March 31.
The court filing followed its decision Friday to shut down its lending business and slash thousands of jobs as American Home's banks put the squeeze on its credit lines. American Home said it has more than 100,000 creditors.
GETTING WORSE
The bankruptcy filing showed that problems in the mortgage business have spread from the riskiest, "subprime" borrowers to people who fall just short of qualifying for prime loans.
WL Ross & Co., a firm run by distressed-asset specialist Wilbur Ross, will provide up to $50 million in debtor-in-possession financing to sustain American Home. Ross expects problems in U.S. mortgages will worsen.
"It's our initial foray into subprime," Ross said in an interview. "We've been looking at subprime for quite a while and this is the first affirmative commitment we've made."
Separately on Monday, troubled mortgage company NovaStar Financial Inc. said it suspended issuing commitments for new loans from wholesale channels until Tuesday.
According to court papers. Melville, New York-based American Home wants to sell its loan portfolio and loan-servicing business through an auction. Bids are due August 29, and an auction may take place on September 5.
Still, American Home said many creditors may not be paid in full, and common shareholders will likely receive nothing for their shares. American Home shares will likely be delisted from the New York Stock Exchange.
American Home hired turnaround specialist Stephen Cooper, of Kroll Zolfo Cooper, as chief restructuring officer to lead it through bankruptcy. Cooper performed a similar role for energy trader Enron Corp. in the second-largest U.S. bankruptcy case ever.
SUDDEN REVERSAL
American Home filed for bankruptcy protection after disruption in mortgage and housing markets fueled a cash crunch.
Lower bids from banks that buy mortgages and loan-backed securities forced American Home to write down the value of its assets, prompting banks that provided its credit lines to demand more cash collateral, the company said in court filings.
The company "experienced this sudden reversal of its fortunes due to the unanticipated and rather sudden deterioration in the secondary and national real estate markets," said Strauss, who founded American Home in 1988.
More than a half dozen mortgage lenders have declared bankruptcy in the past year, with most catering to subprime borrowers. Dozens more lenders have exited the business by shutting down or selling off troubled units.
American Home in late June cut its dividend and warned of rising losses from bad loans. By July 27, it revealed it was suffering a credit crunch and postponed paying a dividend.
By the end of July, it was unable to meet margin calls and lenders threatened to sell assets.
The company shuttered most operations on Friday, laying off about 6,500 workers. It now has about 1,000 employees, and said more jobs will be cut as its operations are wound down.
(Additional reporting by Tim McLaughlin and Jonathan Stempel)
Copyright 2007 Reuters
Friday, August 3, 2007
What does that mean?
It sounds like the worst is over in the declining housing market, but in one of the fastest growing cities during the boom, Bakersfield may not be out of the woods just yet. On the flip side we are still priced well below most surrounding area's and are still seeing a large influx of people coming in from out of town.
Lower Treasury Yields Push Mortgage Rates Down Slightly
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.68 percent with an average 0.3 point for the week ending August 2, 2007, down from last week when it averaged 6.69. Last year at this time, the 30-year FRM averaged 6.63 percent.
The 15-year FRM this week averaged 6.32 percent with an average 0.3 point, down from last week when it averaged 6.37 percent. A year ago, the 15-year FRM averaged 6.27 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.29 percent this week, with an average 0.5 point, down from last week when it averaged 6.30 percent. A year ago, the 5-year ARM averaged 6.27 percent.
One-year Treasury-indexed ARMs averaged 5.59 percent this week with an average 0.5 point, down from last week when it averaged 5.69 percent. At this time last year, the 1-year ARM averaged 5.69 percent.
"Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower," said Frank Nothaft, Freddie Mac vice president and chief economist. "Sales of new and existing homes fell in June, and prices continue to weaken, especially in the markets that had recorded the strongest gains over the past few years. There are early signs, however, that the market is stabilizing. As construction spending levels off, the drag on GDP growth will continue to diminish. Meanwhile, the 5 percent rise in pending home sales in June suggests that sales in July and August may reverse last month's decline."
The 15-year FRM this week averaged 6.32 percent with an average 0.3 point, down from last week when it averaged 6.37 percent. A year ago, the 15-year FRM averaged 6.27 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.29 percent this week, with an average 0.5 point, down from last week when it averaged 6.30 percent. A year ago, the 5-year ARM averaged 6.27 percent.
One-year Treasury-indexed ARMs averaged 5.59 percent this week with an average 0.5 point, down from last week when it averaged 5.69 percent. At this time last year, the 1-year ARM averaged 5.69 percent.
"Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower," said Frank Nothaft, Freddie Mac vice president and chief economist. "Sales of new and existing homes fell in June, and prices continue to weaken, especially in the markets that had recorded the strongest gains over the past few years. There are early signs, however, that the market is stabilizing. As construction spending levels off, the drag on GDP growth will continue to diminish. Meanwhile, the 5 percent rise in pending home sales in June suggests that sales in July and August may reverse last month's decline."
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Welcome to the new Bakersfield Real Estate blog site. We are here to provide news and information about the Bakersfield real estate market as well as help answer any questions you may have in a hassle free environment. We are here for you and so please post any comments, questions, and/or suggestions at any time.
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